Western Air Lines v. Bd. Of Equalization, 480 U.S. 123 (1987)

Western Air Lines, Inc. v. Board of Equalization of the

State of South Dakota
No. 86-732

Argued November 3, 1986
Decided February 24, 1987
480 U.S. 123

APPEAL FROM THE SUPREME COURT OF SOUTH DAKOTA

Syllabus

A provision of the Airport and Airway Improvement Act of 1982, 49 U.S.C.App. § 1513(d)(1), prohibits the imposition of discriminatory state or local property taxes on air carriers. However, § 1513(d)(3) provides that the prohibition does not apply to any "in lieu tax which is wholly utilized for airport and aeronautical purposes." The South Dakota Airline Flight Property Tax, enacted in 1961, is imposed on air carriers on the basis of the value of their aircraft, and provides for allocation of the taxes to the airports used by the carriers, and for use of the taxes exclusively by the airports for airport purposes. This tax, which is centrally assessed, was an exception from the general state scheme of local property tax assessment at the county level. In 1978, the State exempted from ad valorem taxation all personal property that was locally, rather than centrally, assessed. Appellant airline companies paid their flight property taxes in 1983 under protest, unsuccessfully sought refunds from appropriate county and state authorities, and ultimately sought relief on appeals to a South Dakota Circuit Court on the ground that, because airline flight property was subject to taxation, while most other personal property was exempt, the state tax violated §1513(d)(1). The court consolidated the actions and held that the state tax was permitted under § 1513(d)(3). Although disagreeing with that holding, the South Dakota Supreme Court affirmed on an alternative ground based on its interpretation of other provisions of § 1513(d).

Held: The South Dakota tax is an "in lieu tax which is wholly utilized for airport and aeronautical purposes" under § 1513(d)(3), and thus does not violate the antidiscrimination provisions of § 1513(d). The question whether a state tax is an "in lieu tax" under § 1513(d)(3) is one of federal law, and the purpose and effect of the state tax must be examined in light of the policy embodied in the federal law. Section 1513(d)(3)’s requirement that the state tax be "wholly utilized for airport and aeronautical purposes" reflects the federal policy of preventing state and local governments from excessively taxing nonvoting, nonresident businesses in order to subsidize general welfare services for state residents. The phrase "in lieu tax" restricts § 1513(d)(3)’s protection to property taxes applied to the exclusion of any other tax on the property -- that is, to taxes applied in lieu of any other possible property tax -- and reinforces the policy reflected in the "wholly utilized for airport and aeronautical purposes" phrase. The South Dakota Airline Flight Property Tax establishes a method of taxing a particular type of property to the exclusion of any other tax on that property. It therefore stands in lieu of the generally applicable ad valorem property tax that had been assessed on most other commercial and industrial property in the State at the time the airline flight property tax was established. It is not necessary that, in order to be exempted under § 1513(d)(3), the state tax must take the place of another tax that historically had been applied to the airline property. Pp. 129-134.

372 N.W.2d 106, affirmed.

O’CONNOR, J., delivered the opinion for a unanimous Court. WHITE, J., filed a concurring opinion.